In question are the legality and terms of a lease with the popular Gulfside restaurant

VENICE -- It's 2 o'clock on a postcard-perfect Florida day, and all the seats at the tiki bar are taken at Sharky's on the Pier, where $7 margaritas and pina coladas flow amid the sounds of the surf and Jimmy Buffett tunes.

Not far away, co-owner Mike Pachota has made his office out of a corner table under the thatched roof. Slightly sunburned and clad in a Hawaiian shirt, the 53-year-old periodically slaps his hand down to keep papers from fluttering down the beach, while one of his 110-person staff diligently checks on him. More coffee? Water? Soda? No thanks.

Seems idyllic, but these days the job is anything but.

Pachota and his partner, Greg Novak, are defending their plan to expand their $7 million-per-year kingdom of seafood and booze against City Hall, which wants a bigger cut of the action.

The city knows Sharky's is just one of a handful of restaurants between Tampa and Fort Myers that are grounded on public beach.

And with its location next to the Venice Municipal Fishing Pier and looking out upon the Gulf of Mexico, Sharky's is often packed, in season and out. Since 1990, Sharky's gross sales have climbed from $1.5 million to nearly $7 million last year, a 350 percent gain.

In a deal Pachota and Novak made with City Hall in 2000, they agreed to extend a sea wall and pay half the $2.1 million cost of a new parking lot and beach pavilion to go next door in exchange for something of inestimable value: the right to expand.

City leaders have blasted that agreement, with one councilman on Tuesday calling it a "thorn in our side." They say it gives too much away to the restaurateurs. The lease grants Sharky's 40 years at the beach site -- an extension to 2026 -- and the right to double capacity from 250 to 550 seats, all without raising the rate it pays the city.

City Council member John Moore has not only questioned the terms, he questions the legality of the lease itself, which includes clauses with blank spaces where there should be key details, such as the amount the restaurant should pay in rent. Those involved have taken to calling it "the blank lease."

On Tuesday, city leaders voted to ask a judge to throw out the lease. Ultimately, the city hopes that a judge will find the contract, with its blanks and missing signatures, invalid, which would force Sharky's back to the negotiating table.

"The city needs to do a better job of being stewards of public lands when it leases to private enterprise," said council member Moore, an ex-judge and the leading critic of the deal. The terms, he said, shortchange the city in its lease of "one of the most pristine and prime Gulf-front properties anywhere in the area."

But Sharky's owners insist the city earns plenty under its present fee arrangement (about $330,000 on last year's $6.9 million in sales). They estimate that extending the sea wall and paying for half of the parking and pavilion will cost several million dollars, a fair trade, fairly negotiated, they argue.

"We feel that we have a deal," said Sharky's co-owner Pachota. Though he's open to talking, he said, he'd rather defend the agreement in court than simply make concessions.

"If all they want to do is take things away -- then if it has to end up in court, that's where it will end up," Pachota said.

The debate over Sharky's contract with the city had simmered until recently, when the city decided it could no longer wait to begin work on the parking and pavilion. Already, the state has granted its last extension on the construction permit, which now expires in May 2007, according to City Manager Marty Black.

The city approved the $2.1 million contract, and work is expected to begin within 30 days, according to the city engineer.

But complicating things, Sharky's has already split some of the cost of design and prep work -- several hundred thousand dollars' worth, Pachota said. He expects that will haunt the city on their day in court.

Meanwhile, Pachota said, Sharky's will begin to move forward on its restaurant additions, which would enlarge the existing dining area and add a new wing, complete with its own kitchen, bar and indoor and outdoor seating area. Once completed, the new restaurant would cover a full acre of beachfront.

"Our intention is to move forward on a valid contract," Pachota said.

Under its current lease, Sharky's owners pay the city a base rent of around $1,100 per month, plus 5 percent of its gross sales, beyond the first $300,000.

Although it's unclear from the documents, former City Manager George Hunt, who played a lead role in negotiating the 2000 agreement, told the Herald-Tribune in 2004 that Sharky's new fee structure would raise base rent to around $83,000 per year, plus 5 percent of the restaurant's gross sales above $1.3 million.

Essentially, Patchota said, his restaurant agreed to a "revenue-neutral" deal that would pay the city the same under either fee structure. In other words, the increase in base rent would offset the higher threshold of gross sales from which the city takes its 5 percent cut. But Pachota argues that the deal benefits the city by guaranteeing more in base rent, which would have to be paid even if Sharky's sales suddenly slipped.

City officials, he said, overlook the restaurant's draw for tourists. Its radio ads, he said, run on stations throughout the region.

"We make Venice a more desirable place and a more well-known place," Pachota said. "It's been good for Sharky's, but it's also been good for the city."

He added that higher sales figures of an expanded Sharky's will naturally equate to larger payments to the city.

"They automatically get a nickel on every dollar we sell," Pachota said. "As we try to do more business, we're expecting to pay more rent. To me, that's an escalation."

But Moore contends that the former city administration botched the deal, as evidenced by the lease papers. When he first heard and objected to their expansion plans in a 2003 meeting attended by some city officials, Sharky's owners and their attorney, the restaurant owners got angry and the former city manager abruptly stood up and left, Moore recalled.

On Dec. 12, Moore sent a memo to the mayor and City Council, raising questions about the deal. He asked whether the city should extend the lease for 40 years, how much the restaurant should be allowed to expand, and whether a member of the City Council should participate in negotiations.

"It was just absurd the way it was going on, in my opinion," Moore said.

Moore said he felt that the restaurant's owners, who are incorporated under the name, The Pier Group, had pressured city administrators at the time into agreeing to a deal that went largely unscrutinized by the City Council at the time.

"This is what's bothered me about the process all the way; there's never been a decision by the City Council to do this with the Pier Group," Moore said. "I don't think you will ever find a set of minutes where this issue was ever discussed in an open council meeting and a decision was made to go forward. It just shouldn't happen."

Originally published  May 14. 2006

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